EQB (TSE:EQB) said its third quarter marked a major shift in its business following the closing of its PC Financial acquisition, which contributed one month of results during the period and expanded the company’s credit card, insurance, deposit and loyalty-linked offerings.
President and CEO Chadwick Westlake described the quarter as a “historic inflection point” for the company, while cautioning that the results did not yet fully reflect the earnings power of the combined organization. PC Financial contributed approximately $10 million of earnings excluding favorable purchase price accounting impacts, he said.
Quarterly Results and Balance Sheet
On an adjusted basis, diluted earnings per share rose 4% sequentially to $2.12, while return on equity increased to 10.3%, according to CFO Anilisa Sainani. Return on tangible common equity, which excludes approximately $580 million of goodwill and intangibles recognized in connection with the transaction, increased 40 basis points sequentially to 11.1%.
The company generated more than $1 billion in revenue during the first nine months of fiscal 2026, Westlake said. Net interest income totaled $319 million, up 22% both year over year and sequentially, while net interest margin increased 33 basis points to 2.41%. Sainani attributed the margin expansion primarily to the addition of the acquired credit card portfolio.
Non-interest revenue rose 55% from a year earlier and 77% from the prior quarter to $73.9 million. The company said PC Financial added recurring revenue streams from interchange, card fees and insurance-related activities, though lower securitization income partly offset those gains.
Loans under management increased 12% year over year and 7% sequentially to $82.5 billion. Most of the sequential increase reflected the acquired PC Financial credit card receivables. Excluding those cards, loans under management rose 1%, supported by insured multi-unit residential mortgages, decumulation products and uninsured single-family residential lending.
Total deposits rose 3% from a year earlier and 2% sequentially. Retail deposits represented 29% of total funding, more than two percentage points higher than a year ago. Sainani said the company expects its larger customer base to support further growth in lower-cost deposits.
Integration Progress and Customer Growth
EQB said it achieved 50% of its $30 million cost-synergy target on an annualized basis during the first month after the transaction closed. The company expects integration costs related to brand convergence, digital-platform integration and customer initiatives, but said those investments are included in its business case for the acquisition.
Adjusted non-interest expenses increased 19% year over year and 32% sequentially, reflecting the addition of PC Financial and higher initiative spending. EQB’s efficiency ratio was 50.1%, and management said it remains on track to achieve a low-50s efficiency ratio for fiscal 2026.
The company increased its quarterly dividend 3% sequentially and 15% year over year to $0.63 per share. Its common equity tier 1 ratio stood at 13.4%, compared with 13.6% in the previous quarter.
Westlake said EQB has begun cross-selling card products to existing EQ Bank customers, with credit card applications rising 3% month over month in the first month after closing. The company also reported a record month for new PC Insurance policies, reaching 93,000 policies in force.
EQB has introduced EQ Bank pop-up locations within Loblaw stores in three major Canadian cities as part of a PC Optimum promotional campaign. Westlake said the Loblaw and PC Optimum relationship gives the company access to an estimated 14 million to 15 million Canadians who visit those locations weekly.
Daniel Rethazy, executive vice president of personal banking, said cross-selling began immediately after closing. EQB has marketed PC Mastercard offers to existing EQ Bank customers and intends to expand customer relationships across cards, deposits, GICs and other products as integration advances.
Credit Provisions Remain a Key Headwind
Higher performing and impaired credit provisions were the principal headwind during the quarter. The company excluded a $219 million day-one provision on acquired performing credit card receivables from its adjusted results, describing it as a one-time acquisition-related provision rather than a reflection of post-closing credit deterioration.
Chief Risk Officer Puneesh Arora said about 70% of PC Financial card customers are super-prime, with an average FICO score of 768. He said 72% of customers have been with PC Financial for more than five years and that the portfolio is geographically diversified across Canada.
Performing provisions totaled $35.2 million, including $21 million related to the acquired card portfolio during July, as well as a material reserve build in personal residential lending in response to macroeconomic uncertainty. EQB’s allowance for credit losses coverage ratio increased to 95 basis points, or 50 basis points excluding the credit card portfolio, compared with 46 basis points in the second quarter.
Impaired provisions increased to 42 basis points, up 7 basis points sequentially, driven by higher provisions in personal and commercial lending outside the card portfolio. Personal lending impaired provisions totaled $17 million, while commercial impaired provisions were $24.9 million and equipment-financing provisions were $8.4 million.
Management said residential pressures remain concentrated in certain Greater Toronto Area suburbs and in loan vintages associated with peak property values. Arora said the company has not seen those pressures spread to other regions or vintages. Commercial provisions were concentrated in a small number of previously impaired loans facing extended resolution times amid a subdued commercial real estate market.
Darren Lorimer, executive vice president of commercial banking, said EQB does not expect material new commercial real estate provisions next quarter, all else equal, after taking higher provisions on several larger loans where distressed asset values softened.
However, Rethazy said collection and enforcement timelines have lengthened, with some cases now extending 18 to 24 months. He said the issue is national in scope, with Quebec presenting the greatest challenge.
Outlook
EQB expects loans under management to finish fiscal 2026 at the upper end of its prior high-single-digit to low-double-digit growth outlook. Management also expects net interest margin to improve in the fourth quarter as PC Financial contributes a full quarter of results.
Westlake said the company expects fiscal 2026 ROE to improve from the third-quarter level, including return on tangible common equity in the 12% range. He said continuing geopolitical, trade and macroeconomic uncertainty could add sensitivity to that outlook.
The company plans to provide its fiscal 2027 and refreshed medium-term outlook at an investor day scheduled for Dec. 7.
About EQB (TSE:EQB)
EQB Inc formerly Equitable Group Inc trades on the Toronto Stock Exchange TSX: EQB and EQB.PR.C and serves over 360000 Canadians through its wholly owned subsidiary Equitable Bank Canadas Challenger Bank. Equitable Bank has grown to become the countrys eighth largest independent Schedule I bank with a clear mandate to drive real change in Canadian banking to enrich peoples lives. At Equitable Bank we are as invested in our employees as we are in our business. Thats why we are consistently recognized as one of Canadas Top Employers a rating that comes from our 1300+ employees.
